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25-09-2014, 11:15 PM
Where is ALZ's development relative to the competition?
Aussie Developers will feel pinch: Macquarie
THE AUSTRALIAN SEPTEMBER 26, 2014 12:00AM
Kylar Loussikian
Journalist
Sydney
MOVES to curb lending to property investors would “clearly be detrimental” to listed home developers like Mirvac, Stockland and Lend Lease, according to Macquarie Securities analysts.
Shares in the three biggest listed residential developers fell after the release of the Reserve Bank’s financial stability review, in which it flagged talks with the Australian Prudential Regulatory Authority to explore “further steps that might be taken to reinforce sound lending practices”.
The broader market closed down 0.74 per cent on Wednesday, but Lend Lease dropped 2.14 per cent, Mirvac 1.71 per cent and Stockland 1.25 per cent. Lend Lease and Stockland made up some of those losses yesterday, up 0.85 per cent and 0.76 per cent respectively, but Mirvac fell again, down 0.29 per cent.
The Macquarie analysis noted there was a market expectation of “elevated Australian residential earnings from these entities in the medium term”.
Of the three, Lend Lease is less exposed, as it has already pre-sold a significant proportion of its apartment developments, and will book the profits as they complete.
Measures to limit investor activity could also impact on non-residential real estate investment trusts including Dexus, Goodman Group and Cromwell Properties, companies that stand to benefit from the booming office-to-residential conversion market.
A JPMorgan note concurred with Macquarie, suggesting that while it wasn’t “an alarm bell”, talk of lending restrictions could cause investors to “question medium-term residential sales volumes and prices”.
But others questioned the probability of regulatory changes and the extent they could impact on demand for property, particularly with supply remaining below demand in metropolitan markets.
Winston Sammut, managing director at fund manager Folkestone Maxim Asset Management, said any impact was likely to be “minor” and he believed the RBA was trying to talk down the sector rather than bring in meaningful measures.
Mr Sammut said it was price growth in Sydney that was causing the most concern, and it would be difficult to bring in changes that would have a meaningful impact purely on that market.
“Mirvac released the next stage of Harold Park (in Sydney) and it pretty much all sold out in one day, and another development here on George Street, that sold out quickly too,” he said. “Based on revenue growth going forward, I don’t think there will be much of an impact on stocks like Mirvac, where their apartment developments are sought after.
“Stockland is different, all they do is buy land and subdivide it, so they are more exposed to the level of interest rates and affordability in terms of meeting the market for first home buyers,” he said.
Aussie Developers will feel pinch: Macquarie
THE AUSTRALIAN SEPTEMBER 26, 2014 12:00AM
Kylar Loussikian
Journalist
Sydney
MOVES to curb lending to property investors would “clearly be detrimental” to listed home developers like Mirvac, Stockland and Lend Lease, according to Macquarie Securities analysts.
Shares in the three biggest listed residential developers fell after the release of the Reserve Bank’s financial stability review, in which it flagged talks with the Australian Prudential Regulatory Authority to explore “further steps that might be taken to reinforce sound lending practices”.
The broader market closed down 0.74 per cent on Wednesday, but Lend Lease dropped 2.14 per cent, Mirvac 1.71 per cent and Stockland 1.25 per cent. Lend Lease and Stockland made up some of those losses yesterday, up 0.85 per cent and 0.76 per cent respectively, but Mirvac fell again, down 0.29 per cent.
The Macquarie analysis noted there was a market expectation of “elevated Australian residential earnings from these entities in the medium term”.
Of the three, Lend Lease is less exposed, as it has already pre-sold a significant proportion of its apartment developments, and will book the profits as they complete.
Measures to limit investor activity could also impact on non-residential real estate investment trusts including Dexus, Goodman Group and Cromwell Properties, companies that stand to benefit from the booming office-to-residential conversion market.
A JPMorgan note concurred with Macquarie, suggesting that while it wasn’t “an alarm bell”, talk of lending restrictions could cause investors to “question medium-term residential sales volumes and prices”.
But others questioned the probability of regulatory changes and the extent they could impact on demand for property, particularly with supply remaining below demand in metropolitan markets.
Winston Sammut, managing director at fund manager Folkestone Maxim Asset Management, said any impact was likely to be “minor” and he believed the RBA was trying to talk down the sector rather than bring in meaningful measures.
Mr Sammut said it was price growth in Sydney that was causing the most concern, and it would be difficult to bring in changes that would have a meaningful impact purely on that market.
“Mirvac released the next stage of Harold Park (in Sydney) and it pretty much all sold out in one day, and another development here on George Street, that sold out quickly too,” he said. “Based on revenue growth going forward, I don’t think there will be much of an impact on stocks like Mirvac, where their apartment developments are sought after.
“Stockland is different, all they do is buy land and subdivide it, so they are more exposed to the level of interest rates and affordability in terms of meeting the market for first home buyers,” he said.